AUSTIN — Gov. Rick Perry's pet fund that gives taxpayer dollars to high-tech Texas startups is leaving room for $6 million in potential losses because of troubled investments, according to a new state report.
The allowance for bad debts is a drain on the value of the Texas Emerging Technology Fund, which Perry calls an economic sparkplug but that critics have blasted because of its performance and politics.
An annual report released last week shows that unless the state somehow gets its money back from failed projects, the fund now stands at $2.4 million above what the state has put in – down from $4.6 million a year ago.
Employment levels also fell at more than 130 companies in the fund, but a true employment picture is unclear because several startups didn't submit new figures.
It makes for a muddled snapshot of the tech fund that Perry launched in 2005. Lawmakers started budget talks in January with no new funding for the program that has absorbed criticism over accountability and transparency.
Perry spokeswoman Lucy Nashed said investments in startups take time to mature and that massive hiring is not the chief goal of the tech fund, which Perry has trumpeted as one of his signature economic development initiatives as governor.
"These early stage companies are focused on getting their technologies off the ground, and over time have the potential to become bigger job-creation engines," Nashed said.
The report is not without bright spots. The tech fund made $3.2 million from selling assets in 2012, which is money that would otherwise boost the fund's value. Outside investment in tech fund companies also rose by 29 percent, and Perry's office points to that so-called "follow-on funding" as a barometer of whether the fund is making smart choices.
Perry calls the tech fund a "strategic priority" in the proposed 2014-15 state budget that he sent to lawmakers last week. He is asking for another $132 million to hand out to more companies, but budget writers in both the House and Senate appear to be waiting for Perry's office to make a fresh case. Budget drafts in both chambers include no new tech fund money.
"Continued funding for this program is essential to innovative economic development in Texas," Perry's budget says.
The tech fund has given $184.1 million to 137 companies the past six years. The state takes an equity position in companies awarded funding, and Perry's office puts the current value of those assets and total investments at $192 million.
But that's before $6 million in what the report calls "potential bad debts" – failed investments the state might not recoup. Nashed said Perry's office wanted "to give lawmakers a clearer picture of where the fund stands" but says those losses are unrealized at this time.
Twelve companies in the fund – about 9 percent of the entire portfolio – are listed as having ceased operation, filed for bankruptcy or referred to the Texas attorney general's office for contract breaches. Among the most recent was SeprOx Corp., which was developing home oxygen generators with the help of a $750,000 state investment before the company closed in December, according to the report.
Total jobs within the tech fund are reported at 1,236 – a 16 percent drop from a year ago. But that tally does not include 10 companies that Nashed said would not provide employment data because of "confidentiality concerns."